Globalisation and Union Opposition to Technological Change

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Abstract

We find that trade unions have a rational incentive to oppose
the adoption of labour-saving technology when labour demand is
inelastic and unions care much for employment relative to wages.
Trade liberalisation typically increases trade union technology
opposition. These conclusions are reached in a model of international
duopoly with monopoly wage setting in one of the countries,
and two-way trade. An important stepping stone for the
result is to note that even though trade liberalisation means a
tougher competitive environment for firms, labour demand tends
to increase. We also find that the incentive for technology opposition
is stronger in the more technologically advanced country
and in the country with the larger home market, complementing
earlier explanations for technological catch-up and leapfrogging.